Paul Greig wanted to do the right thing. The chairman, president and chief executive of FirstMerit sought to reassure employees about the fallout from the just-announced purchase of the Akron bank by Huntington of Columbus. He tapped his experience, having weathered mergers in the past. He had the benefit of his record, FirstMerit a strong performer under his leadership.
As reported by Betty Lin-Fisher, a Beacon Journal business writer, Greig told employees who are understandably anxious about the road ahead: “It is absolutely in human nature to have concerns and misgivings and thoughts that are probably thinking more of the first letters in merger, me. From a personal perspective, I am comfortable with our future. I hope you’re going to be as comfortable today as I am today as you absorb this change and see the management team.”
Many words have been spoken and written about the $3.4 billion sale of an Akron institution. Huntington has been reassuring, too. It has detailed commitments to the city, including the creation of a local foundation, fueled by $2 million a year for the next 10 years.
Yet those words of Greig were eye-catching, especially his reference to “me” and his level of comfort with the deal. Add a comment from Steve Steinour, the chief executive of Huntington, also reported by Lin-Fisher. He talked about Greig, who will retire yet remain a consultant for a couple of years: “We have enormous respect for him and his skills. He wants to play some golf. He’s been at it for 10 years.”
This sale is good for Greig.
Filings with the Securities and Exchange Commission show Greig receiving $21.1 million in retirement compensation. More, he and a handful of other top executives benefit from change-in-control agreements, the sale of the bank bringing Greig another $10.6 million, or an exit package of $31.7 million in all.
According to the filings, Terrence Bichsel, the chief financial officer, will receive $8.4 million.
Such agreements are common, and the Greig package appears modest compared to those exceeding $100 million. One argument goes that the compensation serves the interests of shareholders and the company. For instance, a chief executive may be more willing to take necessary risks, knowing that his or her departure will be cushioned.
He or she also may be more open to taking a walk for the good of the operation. Thus, transitions in the executive suite are smoothed by the prospect of a big payday.
Then, there is the problematic or darker side. For a chief executive and team nearing retirement, what is the temptation? Engineer a sale that may be portrayed as essential or inevitable, with soothing and hopeful words applied, all knowing they will depart with even more millions?
Call it the “me” factor, which leads analysts and some executives to worry about a corrupting effect. A suspicion hovers, whether the deal is framed more by spin or involves perfect sense and bright days ahead.
The practice also reflects the mammoth, even outrageous, compensation for chief executives. Recall the comparison: Fifty years ago, chief executives received around $20 in compensation for every dollar going to a typical worker. Today, the ratio is roughly 200 to 1.
What has caused chief executive pay to soar? Many point to a cozy culture among boards of directors. Others add the work of consultants crunching numbers and making a racket of comparison shopping for top executives. Tax changes have played a role. So has the massive size of many companies.
One view holds that free agency in baseball and other pro sports accelerated things, fueling superstars, celebrities and pay for stock performance. Which evolved, according to some, into a great man or great woman theory of corporate leadership, a Steve Jobs appearing all-commanding, all-controlling — and deserving of a huge pay package.
Whatever the reason, Thomas Piketty, an economist and author of Capital in the 21st Century, looked at income data from the decade starting in 2000 and found that two-thirds of those in the top tenth of 1 percent were top executives.
Is the ratio today an accurate measure of their part compared to all those working under them?
There is an impressive local departure from the trend. Filings at the SEC reveal that Chuck Jones, the chief executive at FirstEnergy for the past year, pulled out of the change-in-control agreement in September. So, if the power company is sold, something Jones and Akron do not want to see, he will have his retirement package and nothing more.
Douglas is the Beacon Journal editorial page editor. He can be reached at 330-996-3514 or emailed at email@example.com.